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Overseas rules change could pave way for Simon deals

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New rules proposed for real estate investment trusts in the United Kingdom could help Indianapolis-based Simon Property Group Inc. as it seeks to expand its shopping mall dominance outside the United States.

The changes would loosen restrictions on ownership and stock-exchange listings, allowing for the creation of up to 40 new REITs, Bloomberg reported. Properties or companies in the UK would be eligible for REIT status even if their owners' shares trade on overseas exchanges.

That could help pave the way for Simon to add to its holdings in the UK, a strategy it has been plotting for years, said Rich Moore, an analyst for RBC Capital Markets in Ohio.

"If there are changes that make it easier on REITs, that's a positive for Simon," Moore said Tuesday. "They're a big battleship with a lot of capacity to buy things. They're just waiting, biding their time."

Simon already owns a stake in Capital Shopping Centres Group and Capital & Countries Properties, two London-based firms that operated together as Liberty International prior to May 2010, according to Simon regulatory filings.

Simon controls less than 6 percent of each company's outstanding shares in order to avoid a tangle with British REIT regulations.

It's not the first time Simon has been "thwarted" by circumstances out of its control as it seeks to grow, Moore noted. Another recent example was Simon's unsuccessful attempt to acquire Chicago-based General Growth Properties out of bankruptcy.

The proposed changes in the UK “will allow more cross-border M&A activity,” Phil Nicklin, who heads Deloitte LLP’s unit focused on REITs, told Bloomberg. “Investment banks are already talking to me about this.”

REITs in the UK avoid corporation or capital gains taxes in return for paying investors 90 percent of the income generated by their property.

The new rules won’t allow the creation of private REITs, according to the UK Treasury. Closely held real estate companies can qualify for the tax exemptions if they seek to sell shares on a London exchange within three years.

Current rules require REITs to have 25 percent of their shares widely held by investors. Pension funds and life insurance companies may gain exemptions from the rule, the Treasury said, without being more specific.

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  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

  4. No, HarveyF, the exact opposite. Greater density and closeness to retail and everyday necessities reduces traffic. When one has to drive miles for necessities, all those cars are on the roads for many miles. When reasonable density is built, low rise in this case, in the middle of a thriving retail area, one has to drive far less, actually reducing the number of cars on the road.

  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.

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